Wall Street Breakfast: Stocks Head For Third Week Of Losses

by: Wall Street Breakfast
Wall Street Breakfast
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U.S. futures are pointing lower, as global stocks extend losses and Chinese shares entered a bear market after plunging 3.6% (see below). Investors are also poised to get more insight into how the U.S. economy and corporate America are doing today, with reports on consumer sentiment, retail sales and manufacturing, and several big financial names - Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), BlackRock (NYSE:BLK) and PNC Financial (NYSE:PNC) - releasing quarterly earnings.


Giving up yesterday's gains, the Shanghai Composite fell 3.6% to 2,900 during the session, pushing the index to an 8.8% loss for the week. That puts the benchmark extremely close to its 2,850 level in August, when Chinese policymakers scrambled to prevent a full-blown financial crisis through a raft of support measures and a so-called 'National Team' of investors. Chinese shares also posted losses after data showed new yuan loans in December were well below the previous month's lending, and broad M2 money supply growth also slowed.

Germany's top court next month will rehear five lawsuits alleging that the country should oppose the European Central Bank's 2012 bond-buying program even after EU judges last year cleared it with minor strings attached. The German judges will address whether the ECJ's backing of the Outright Monetary Transactions program and the potential action by the ECB are in line with German constitutional principles.

Greece's creditors are expected to start talking soon over an issue that has been looming over the eurozone since 2010: cutting the country's mountainous debt. However, the talks won't begin until after still-difficult negotiations over steps Greece must take, including pension changes and budget cuts, to complete the first review of Athens' latest €86B bailout package. Once there is agreement on that, "then we will start political debates on debt sustainability," said the Eurogroup's Jeroen Dijsselbloem.

Crude futures are once again in the $20s, with the prospect of additional Iranian supply on expectations that Western sanctions will be lifted within days. China's Sinopec (SNP, SHI) has also purchased its first ever batch of U.S. oil for export, a landmark transaction after the ending of a four-decade ban on domestic exports. West Texas Intermediate is down 5.3% at $29.54 a barrel, wiping out the 12-year low of $29.93 hit earlier this week.


Confirming earlier reports, General Electric (NYSE:GE) has agreed to sell its appliances business to Qingdao Haier for $5.4B. The deal, which will generate an after-tax gain of about $0.20 per share upon closing, values the appliances business at 10x its EBITDA in the last 12 months, and GE expects to offset the gain with restructuring in 2016. Louisville will still remain the headquarters for GE Appliances.

Amazon already has its own trucks, drones and maybe some planes, but ships are now seen as the next horizon. The company's China subsidiary has received a license in the U.S. to operate as an ocean freight forwarder - an entity that organizes the shipment of goods from a supplier or factory in one region to a company or customer somewhere else. The license was unearthed by Flexport, a San Francisco-based logistics startup. AMZN -1.4% premarket.

Nike has agreed to a $252M deal with Ohio State University to extend its existing sponsorship by 15 years, escalating an arms race among sportswear makers and top sports schools. In the past year, Nike (NYSE:NKE) has also signed a 15-year, $250M renewal with the University of Texas at Austin and reached an 11-year, $169M deal with the University of Michigan.

American Apparel's board of directors has rejected the latest takeover from investors who are backing the return of the retailer's ousted founder, Dov Charney. The vote means an offer valued at $300M from investment funds Hagan and Silver Creek Capital must be further sweetened to win over the company, or they must convince a judge next week to throw out a competing proposal backed by American Apparel's (APP) lenders.

Within a few weeks, Netflix subscribers will no longer be able to use proxies to watch content not available in their home country. "If all of our content were globally available, there wouldn't be a reason for members to use proxies or unblockers," David Fullagar, Netflix's (NASDAQ:NFLX) vice president of content delivery architecture, wrote in a blog. The announcement comes just a week after the company went live in more than 130 countries, covering almost the entire globe except China.

Foursquare CEO Dennis Crowley is stepping down as the company seeks to restart growth under his successor Jeff Glueck, who previously served as operating chief. The leadership change comes as the firm closes a new $45M funding round aimed at bolstering its location data-based advertising and developer businesses. The financing pegs Foursquare's valuation at roughly half of the approximately $650M that it was valued at in its last round in 2013.

BHP Billiton -7.2% premarket after saying it would write down the value of its U.S. shale assets by $7.2B, cementing expectations it will be forced to cut its dividend for the first time in over 25 years. Free-falling oil prices are the latest headache for BHP, which already is grappling with issues from a dam burst at a Brazilian mining venture to a collapse in prices for iron ore, its biggest division.

According to regulatory filings, Berkshire Hathaway (BRK.A, BRK.B) paid about $390M for an additional 5.1M shares of Phillips 66 (NYSE:PSX) between Jan. 4 to Jan. 11. The purchases boost Berkshire's Phillips 66 investment to 65.68M shares, or about 12.3% of those outstanding. Buffett fans, and perhaps some crude oil watchers, likely are wondering if he is calling a bottom in the oil price rout.

Goldman Sachs has entered an agreement in principle to resolve investigations by a number of authorities relating to sales of faulty mortgages between 2005 and 2007. Under the terms of the agreement, The bank will pay a total of $5.1B, including a $2.385B fine, $875M in cash payments, and $1.8B of consumer relief. The deal will also cut Goldman's (NYSE:GS) Q4 after-tax earnings by about $1.5B.

The U.K. Competition and Markets Authority has approved BT's (NYSE:BT) £12.5B acquisition of EE unconditionally, stating the tie-up won't result in a substantial lessening of competition. The full deal is set to close on January 29 when Deutsche Telekom (OTCQX:DTEGY) takes a 12% BT stake and Orange (NYSE:ORAN) takes a 4% share stake in the company. A Deutsche Telekom representative is also expected to join the BT board imminently.

Hyatt said its previously disclosed breach of payment cards affected 250 hotels in approximately 50 countries, making it one of the most wide-ranging incidents in a spate of hotel cyber attacks. Most of the exposure was found at hotel restaurants, although a small percentage of the at-risk cards were used at spas, golf shops, parking facilities and hotel front desks. Hyatt's (NYSE:H) breach lasted from Aug. 13 to Dec. 8, 2015.

Volkswagen lost further market share in Europe in December as the rest of the world's manufacturers enjoyed a blockbuster end to the year that helped push annual car sales in the region up 9.2%. Even though December sales rose 4.7% at the VW Group (OTCPK:VLKAY) in the EU, the company's share of regional sales slid for the month to 22.2% vs. 24.7% at the same point in 2014. Sales at the Porsche (OTCPK:POAHY) marque - which has been drawn into the emissions scandal in the U.S. - declined by more than 10%.

Transportation Secretary Anthony Foxx has unveiled the Obama Administration's 2017 budget proposal that includes $4B for self-driving car pilot projects over a 10-year span. Among other things, the funds would cover a program to test self-driving cars on technologically advanced roads and would encourage state governments to create regulations for autonomous vehicles. Foxx suggests an interest in lowering auto fatalities is behind the effort.

Thursday's Key Earnings

Infosys (NASDAQ:INFY) +8.4% following a hike to guidance.
Intel (NASDAQ:INTC) -6.3% AH as server CPU growth slowed.
JPMorgan (NYSE:JPM) +1.5% on topping expectations.
Taiwan Semiconductor (NYSE:TSM) +6.5% after beating estimates.

Today's Markets

In Asia, Japan -0.5% to 17147. Hong Kong -1.5% to 19521. China -3.6% to 2900. India -1.3% to 24455.
In Europe, at midday, London -1.5%. Paris -1.6%. Frankfurt -1.3%.
Futures at 6:20, Dow -1.5%. S&P -1.6%. Nasdaq -1.8%. Crude -5.3% to $29.54. Gold +0.6% to $1080.10.
Ten-year Treasury Yield -4 bps to 2.05%

Today's Economic Calendar

8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
9:15 Industrial Production
10:00 Business Inventories
10:00 Reuters/UofM Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today